Russia Launches Criminal Probe of Bank Chief

By

James Marson and

Alexander Kolyandr in Moscow and

Noémie Bisserbe in Paris

Updated May 16, 2013 5:10 a.m. ET

Russia's Investigative Committee said Thursday it had opened a criminal investigation into the head of Société Générale SA's local unit for allegedly receiving a bribe, a potential blow to the French bank's plan to make Russia the cornerstone of its international expansion.

Vladimir Golubkov, chief executive of Société Générale's Russian arm Rosbank, was detained by the country's anticorruption squad Wednesday after allegedly collecting five million rubles ($159,000) from an aide, Russia's Interior Ministry said in a statement. The cash was handed to Mr. Golubkov on behalf of a customer who was seeking an extension to his loan and a lower interest rate, the ministry alleged.

ENLARGE

Vladimir Golubkov in an image allegedly taken from a police operation.
Russian Interior Ministry/Reuters

A video posted on the ministry's website shows armed police officers shoving their way past security at Rosbank's headquarters and into the office of Mr. Golubkov, who was standing behind a desk that had stacks of orange 5,000-ruble bills on it.

Rosbank, Russia's third-largest private bank by assets, confirmed Wednesday that a police investigation was under way at its headquarters in Moscow involving "two managers," and said it was fully cooperating with authorities to "help clarify the situation." A ministry official identified the second person targeted by the probe as Tamara Polyanytsina and said she was cooperating with investigators.

The bank announced that it had appointed deputy chief executive Igor Antonov as interim chief executive and said its business activities wouldn't be affected by the detention.

The Investigative Committee on Thursday said Mr. Golubkov had solicited more than $1 million from the customer which was to be handed over via Ms. Polyanitsyna, according to a statement on its website.

"During 2012-2013, he received this sum in several installments. Golubkov and Polyanitsyna were detained by law enforcers while receiving the final part of the demanded sum," it said.

A lawyer for Mr. Golubkov told Interfax news agency Thursday that his client denied wrongdoing. The lawyer, Dmitry Kharitonov, couldn't be reached for further comment. Ms. Polyanitsyna couldn't be reached for comment.

The 48-year-old Mr. Golubkov, who has been Rosbank's CEO since July 2008, couldn't be reached for comment.

A spokeswoman for Société Générale in Paris Wednesday said the bank didn't know where he was, and she declined further comment.

A video posted on Russia's Interior Ministry website Wednesday shows armed police shoving their way into the office of Rosbank CEO Vladimir Golubkov, who was detained after allegedly accepting a kickback of five million rubles ($159,000).

The detentions and formal investigation are a potential setback for the French bank, which has described Russia as a key growth driver to help offset shrinking business at home.

RusRating, a Russian credit-rating firm, said Mr. Golubkov's detention by police "could damage the reputation of the bank in Russia." It could "throw into question the quality of the bank's corporate oversight, including the relationship between the top management in Russia and owner Société Générale," the rating agency said.

Like many banks in Europe, Société Générale perceived Russia, where abundant natural resources have been fueling steady growth, as an alternative to China for expansion. Russia is an attractive market for both retail and investment bankers. Many Russian families own their homes, which they inherited after the collapse of the Soviet Union and can use as collateral to borrow money. Flush with petrodollars, large corporations are making investments in infrastructure and new plants.

The Paris-based lender, France's third-largest listed bank by assets, bought 20% of Rosbank for $634 million in 2006, in a bid to gain a foothold in a promising new market.

After years of costly restructuring, Société Générale has yet to deliver on the billions spent to increase its interest in Rosbank to 82% and integrate back-office and technology platforms, shake up management teams and cut more than 2,500 jobs.

Rosbank's net profit fell 4% to $260 million in 2012 as it set aside more money to cover bad loans, even as revenue rose 11% to $2.51 billion.

A number of Western banks, including HSBC Holdings PLC and Barclays PLC, quit the Russian retail business in recent years after struggling to compete in a relatively mature market dominated by large domestic banks. But Société Générale said earlier this month it was committed to remaining in Russia.

The Russian Interior Ministry said it moved to detain Mr. Golubkov on Wednesday after an unnamed Rosbank customer called police, complaining that the Rosbank CEO was allegedly asking for a bribe to approve his request for a loan extension.

The ministry said Ms. Polyanytsina, the Rosbank aide, agreed to cooperate with police after she was detained with five million rubles in cash, allegedly representing a first installment paid by the unnamed customer.

She allegedly delivered the money to Mr. Golubkov, who was detained as he allegedly received the cash, the ministry said.

Some bankers in Moscow and Paris said they were perplexed by the case, as the sum of five million rubles is a fraction of the 100 million rubles a year that the head of a large Russian bank would expect to earn.

One banker said Société Générale had tightened oversight of its Russian unit in 2012 by appointing Didier Haugel, a longtime executive in charge of risk assessments, as head of Rosbank's board.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.